Although volatility in the Australian share market has been on the rise, the benchmark S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is still hovering near the 6,000 point mark, which it has been unable to breach since early 2008.
At these heights, it can be difficult to know which stocks are still worth your money, especially when it comes to the nation's blue-chip stocks – many of which are trading near never-before-seen prices. Here are three of the market's most intriguing stocks right now, and my thoughts on whether they're a buy, hold or sell.
Commonwealth Bank
It's been a remarkable three years for Commonwealth Bank of Australia (ASX: CBA). Since the beginning of 2012, the stock has exploded from roughly $49 to close at $94.40 prior to the long-weekend – a capital gain of 93% (or 119% when dividends are included).
In that time, the bank's profits have skyrocketed as a result of record low bad debt charges combined with significant loan growth as a result of falling interest rates. Meanwhile, its generous fully franked dividend yield has kept investors coming back for more, pushing the bank's shares to a record high of $96.69.
Although the stock could have further to climb – especially if the Reserve Bank elects to cut interest rates again – the stock is by no means cheap. In fact, it has become so expensive that I struggle to see how it could possibly generate long-term market-beating returns from its current price. With strong headwinds facing the sector and the Australian economy as a whole, I would take my profits on the bank and put the proceeds to work in some of the market's more compelling opportunities.
Medibank Private
Following its highly anticipated float late last year, shares of Medibank Private Ltd (ASX: MPL) skyrocketed much higher than many analysts had expected. The stock jumped to a high of $2.59, but has retreated since the release of its interim earnings results, likely due to the market's high expectations.
Even at $2.38, there is still an enormous amount of hype priced into the stock. Investors seem to expect that the insurer will manage to heavily reduce management costs whilst also improving efficiency to become more competitive with the likes of BUPA, HCF and NIB Holdings Limited (ASX: NHF).
Granted, there is room for improvements to be made which could provide scope for further increases in the share price. As such, I wouldn't be rushing out to sell my stock, but it's also not the most compelling buy at its current price. I'd argue that it's a 'hold' at best.
Woolworths
It's been a tough run for shareholders of Woolworths Limited (ASX: WOW). While the stock has significantly underperformed the ASX 200 over the last five years – having climbed just 1.2% compared to the ASX 200's 21% jump – it's been an even tougher prior 12-month period with the stock down 19%, compared to the ASX 200's 10% rise.
Woolworths' most recent setback came after it released its interim earnings report whereby it also downgraded its full-year earnings guidance as it will invest heavily in its supermarket division. Although this will certainly impact short-term earnings, it seems like a necessary decision for the longevity of the company, and certainly one for long-term shareholders.
Currently trading at $28.99, Woolworths is arguably one of Australia's most attractive stocks. Not only does it provide safety and a defensive earnings stream, it has also consistently grown its dividends over the years – a trend which I don't expect to change anytime soon. According to Morningstar's estimates, the retailer will yield 4.8% fully franked this financial year, which is substantially better than what you could otherwise expect from term deposits or government bonds.
